Sky Broadband with OS 8.6

Hi all, hope someone can help because I've run out of things to try!
My mum is using my old iMac G3 (333MHz) running OS 8.6. It still works fine, and she goes online via dialup. However, she's just signed up for the Sky TV deal which includes free broadband and a free router. Sky say this can't be used with any Mac OS before 10, but I insisted that it should work with 8.6 if we knew what we were doing (which I thought I did!)
Anyway, it DOESN'T work, and I suspect the cause might just be that the ethernet port on the iMac is broken (it's never been used before) but before giving up and telling her she has to either get a new computer or stick with dialup, I'm hoping to rule out all other possible causes. I've read back through this forum and spent a while googling, and although this did produce a few more things to try, none of them worked.
Facts:
1. The broadband connection itself is fine - my iBook works seamlessly with it, both when connected directly with ethernet cable, and when connected wirelessly.
2. The reason I think it's a physical problem is that the light on the router which lights up when a computer is connected doesn't come on when the old iMac is connected, but it DOES come on if I connect my iBook directly. (The odd thing is that it DID come on the very first time I connected the iMac, but it hasn't since.)
3. I've tried replacing the cable with one that I know works (and all the obvious stuff such as trying it the other way round and trying all the other ports on the router) - same result. Broadband fine with new iBook, nothing with old iMac. (And it's definitely not a crossover cable.)
4. If I try to force the iMac to go online (to set the time etc.) it doesn't work, and the IP address that is assigned is the dreaded 169.254.xxx.yyy - this was the case after all the things I tried.
5. Trying to go directly to 192.168.0.1 or 17.149.160.49 doesn't work either.
6. The TCP/IP panel is set to Ethernet, Using DHCP server, everything else automatic except that "load only when needed" is unchecked. The configurations are definitely saved and active.
7. The System Folder does have MacTCP DNR loose in it, and enabled. ObjectSupportLib is not on the computer (I used 8.6 for years and was very used to deleting it after every OS update!
There you go. If anyone has a brainwave that might be able to get my mum online, I'd be VERY grateful to hear it. Thank you very much in advance.

In an arrangement with a Router, there is no reason why Mac OS 8 and 9 should not be supported, except that ISPs do not want to train their people for it.
One possible difference is that your iBook may adapt to use either straight or cross cable, while the iMac needs the right one (straight in this case):
42717- Apple products that require an Ethernet crossover cable
Read carefully, the table is products that do NOT ever require a crossover cable, such as certain iBooks (like yours?).
The quick way to check for straight vs cross cable is to compare the color codes of the tiny wires, by peering through the \[non-clip] side of the connector. A straight cable has the same colors in the same order at each end. A cross cable has two pairs swapped with each other.

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